It is usually the case that when the prices for major raw material for oil refiners which is when crude falls down, it is naturally positive for all these companies. And with such a sharp fall in crude prices, it is likely that OMCs stand to gain. However, that is not the case this time as demand disruptions due to COVID 19 has not only led to a fall in crude oil prices but also demand for products ultimately impacting margins.

Singapore GRMs (the benchmark GRMs) has turned negative in just the last 5 days due to an increasing ban on travel and lockdown across the countries. Last time we saw such a fall was in December 2019. Channel checks suggest that there is a hit of 10mb/d of demand due to which GRMs are falling. Gasoline and jet oil cracks have fallen due to restricted travel across geographies.

Singapore GRMs as on March 16 was at -$2.48/bbl which is a sharp decline in last 5 days from $5.7/bbl on March 10. In February 2020 and January 2020 the price was around $2.9/bbl and $0.4/bbl. However, it was trading around -$0.19/bbl in December 2019.

This is due to a fall in gasoline cracks, gasoline is used in cars, light trucks, small aircraft, sports utility vehicles and is the main US transportation fuel. Gasoline cracks have fallen to -$0.6/bbl from highs of $9.4/bbl as on March 10.

Jet oil cracks of course impacted due to airlines canceling a lot of flights, and they have fallen to $8.7/bbl from highs of $11.2/bbl in the last 5 days.

Additionally, channel checks are also suggesting that marketing volumes have gone down by 20-25 percent on pumps due to lower domestic demand making it a double whammy for the oil marketing companies.
TagsCOVID-19 crude oil Oil oil refiners